China’s Currency Peg: CNBC Explains

CNBC Explains

Thursday, 16 Jun 2011 | 10:39 AM ETCNBC.com

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China's Currency Peg: CNBC Explains

Countries around the world keep their currencies pegged to the U.S. dollar, but how is this balance maintained? It's a simple case of supply and demand, says Salman Khan of the Khan Academy. Learn how the Chinese Central Bank has traditionally pegged the yuan to the dollar and, in the process, maintained a trade imbalance.

Countries around the world keep their currencies pegged to the U.S. dollar, but how is this balance maintained? We saw in a previous video how a floating exchange rate can significantly affect international trade, but how is this achieved? It’s a simple case of supply and demand, says Salman Khan of the Khan Academy. Learn how the Chinese Central Bank has traditionally pegged the Yuan to the dollar, and in the process maintained a trade imbalance.